Sundial All Set To Acquire Inner Spirit (CSE:ISH): Buy Alert?

Summary

  • This move comes amid ongoing M&A and consolidation in the Canadian cannabis industry.
  • Earlier, Sundial Growers had acquired more than 10 per cent stake in Valens Co.
  • Sundial raised US$ 218 million in February through several registered offerings.

Calgary-based Sundial Growers Inc. (NASDAQ:SNDL) is acquiring Inner Spirit Holdings Ltd. (CSE:ISH) in a cash-and-stock deal worth C$ 131 million. The move comes amid ongoing mergers and acquisitions (M&A) in the Canadian cannabis industry. There are over 1,600 legal cannabis stores in the country and this figure will likely climb up to 2,000 stores by the end of this year. 

The shareholders of Inner Spirit will get C$ 0.30 in cash and 0.00835 Sundial common shares for each of its share. Inner Spirit is reportedly the biggest chain of licensed cannabis stores and runs 86 of them under the Spiritleaf brand.

Earlier, Sundial Growers had acquired more than 10 per cent stake in cannabis extraction and distribution company Valens Co. It also invested US$ 22 million in Indiva Ltd, which produces edible cannabis products.

To support its investment strategy Sundial raised US$ 218 million in February through several registered offerings. Commenting on the recent move, Sundial CEO Zach George said that by acquiring Inner Spirit, the company will become a stronger and diverse cannabis company in Canada.

Let's explore the stock and financial performances of these companies in the recent past:

Sundial Growers Inc. (NASDAQ:SNDL)


As per TMX, Sundial holds a debt-to-equity (D/E) ratio of 0.01 and its market cap is worth C$ 1.3 billion. The SNDL stock has soared by about 65 per cent year-to-date and in the past 90 days, about 435 million shares traded hands on the Nasdaq Stock Exchange.

The stock skyrocketed by about 351 per cent in the past six months and its one-year growth sits at 42 per cent. On May 5, the shares closed at US$ 0.78 apiece, 80 per cent down from its 52-week high of US$ 3.96 on February 11, 2021.

One-year chart of stock performance of Sundial (Source: Refinitiv/Thomson Reuters)

In 2020, the company achieved gross revenue of C$ 73.3 million, an increase of 10 per cent year-over-year (YoY). In Q4 2020, the company sold 7,247 kilograms equivalents of cannabis, up from 5,819 kilograms in the same quarter of 2019.

Inner Spirit Holdings Ltd. (CSE:ISH)


On average, 4.5 million Inner Spirit shares were traded on Canadian Securities Exchange (CSE) and the stock grew by 33 per cent in a week. The stock's year-to-date growth stands at about 143 per cent and 172 per cent in a year.

One-year chart of stock performance of Inner Spirit (Source: Refinitiv/Thomson Reuters)

On February 10, 2021, Inner Spirit shares touched its 52-week high of C$ 0.44 and closed at C$ 0.34 apiece on Wednesday, May 5. In 2020, the company's total revenues were C$ 26.8 million, an increase of C$ 19 million from the previous year.

The gross profit was C$ 12.7 million, up by C$ 9 million. The worth of total assets increased to C$ 31.7 million from C$ 22.7 million in 2019. 

The above constitutes a preliminary view and any interest in stocks should be evaluated further from an investment point of view.


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